Zero tolerance for innovation

October 5, 2006

Someone please help me out with this dilemma.

How can one balance thinking that pushes the envelope with regulators’ penchant for confusing speculation with corporate policy? How can you speak your mind when a couple of sentences played back in court could destory your reputation?

One email can put you behind bars.

Investment banker Frank Quattrone was indicted and tried twice for obstruction of justice for forwarding an email to subordinates suggesting they clean up their files. He could have gotten 25 years in prison.

The Government’s case was weak. At the end of 2000, an assistant to Quattrone had emailed him, saying in part, “. . . you may want to send around a memo to all corporate finance bankers . . . reminding them of the CSFB document retention policy and suggesting that before they leave for the holidays, they should catch up on file cleanup. Today, it’s administrative housekeeping. In January, it could be improper destruction of evidence.” Three minutes later, Quattrone replied: “You shouldn’t make jokes like that on email!”

The next day, at the urging of another CSFB officer, Quattrone’s assistant emailed the staff on file cleaning. Quattrone sent an email saying the clean-up was important. The government’s case hinged on interpreting Quattrone’s “You shouldn’t make a joke like that” as giving the assistant authorization to send the email.

The prosecutor took an email out of context and literally made a Federal case out of it. Hold that thought.

Communities of Practice are a major source of innovation.

Members of communities of practice converse, share know-how, help one another solve problems, use the corporate grapevine to great advantage, and help new members get up to speed quickly. Sharing solutions with one another averts duplication of effort. Active social networks speed the dissemination of knowledge. Conversations in the community are the seeds of innovation. And work groups improve decision-making because “all of us are smarter than any of us. “Communities of practice are the shop floor of human capital, the place where the stuff gets made,” says Tom Stewart, currently editor of Harvard Business Review.

Most communities are informal, voluntary, natural, and evolutionary. Their members are mates, pals, and buddies. They meet over lunch or in a bar or at the bowling alley. Conversation can become rowdy. Brainstorming for solutions unearths thoughts you’d never take seriously. Outrageous ideas are fuel for change; innovation consists of outrageous ideas made acceptatble. People say things in their communities they would never repeat outside. Many communities develop jargon that makes it difficult for non-members to understand.

Here’s the rub. In our era, community interaction is often recorded. It’s the source of the know-how that populates knowledge repositories. Far-flung communities leave email footprints. Even instant messenger, chat, and phone calls can be recorded. It is easily subject to misinterpretation.

Imagine that, like Frank Quattrone, you work in a heavily regulated industry. How daring are you going to be if a misconstrued sentence or two made public could ruin your reputation and land you in prison? How can you remain open with what you say if that leaves you open to attack?